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The Endowment Diary

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The Endowment Mis-selling Debacle - one of the UK's worst financial scandals

Wednesday, March 19, 2008

Named and Shamed

Named and Shamed

As we all know, endowment policies have proven to be the worst, most costly financial scandal perpetrated on millions of home owners in living memory.

Money Management have produced a list of the worst performers.

Endowments managed by Resolution and Pearl, which bought up several closed-life funds, dominates the list.

Money Management shows that their endowment policyholders have earned less than in a deposit account over 25 years.

Resolution owns Life Association of Scotland, this was the worst performing endowment in the survey. It gave a 3.9% return over 25 years..yes you did read that correctly...3.9% over 25 years.

What exactly have they been doing with people's money?

Crusader and Britannia, also owned by Resolution, were the third and fourth-worst performers at 4.3% and 4.9% respectively.

National Provident was second with a return of 4.2%.

Clive Cowdery, Resolution's founder, has made millions from his dealing with these funds. However, his policyholders haven't.

Ironically some of Resolution's funds have done very well. Phoenix Assurance, owned by Resolution since September 2004, has paid out £317,800 on typical 25-year maturing endowment policies, reflecting an annual growth rate of 20%, or 1,168% more than the Life Association of Scotland policy.

Phoenix has paid out so much because it has been winding down its estate, and distributing the proceeds to 1,500 policyholders.

Resolution owned National Employers Life, with an annual growth rate of 11%, and Swiss Life, at 9.4%, also topped Money Management's list of 25-year policies.

Money Management reveals that some 10 year endowments have in fact lost money over 10 years, even though the FTSE All Share is up 43.3% during the last 10 years.

The worst 10-year policy, Pearl-owned London Life, fell by 1.6% a year while Resolution's Sun Alliance & London Assurance dropped 1.2%, Royal Life fell 0.6% and Scottish Mutual declined 0.4%.

The holders of these useless products are going to receive a nasty shock when these shortfalls crystallise.